FCC to study whether payments to ISPs signal a broken marketplace

Comcast, Verizon, Cogent disputes could be a “warning sign,” FCC official says.

The Federal Communications Commission doesn’t know enough about the exchange of traffic on the Internet to determine whether it should issue regulations that might prevent disputes that degrade Internet service to consumers.

Milkman described how the FCC has historically regulated interconnections in the landline telephone and wireless markets, taking anything from a “lighter touch” rulemaking approach to price regulation. Connections involving Internet service providers, Internet “backbones,” Web services, and content delivery networks (CDNs) have avoided regulation, albeit with some bumps in the road.

Several disputes led to Internet service providers completely cutting off the “peering” connections between each other in the late '90s and mid-2000s, preventing the exchange of traffic, Milkman noted.

“We're also aware of more recent disputes that have erupted between Comcast and Level 3 in 2010 and between Cogent and Comcast and Verizon earlier this year,” she said. “Rather than de-peering outright, these disputes seemed to involve degradation of service arising from congestion at peering points, particularly during peak usage times.”

In those disputes, Comcast and Verizon complained that Cogent was sending too much Netflix video over connections where the companies exchange traffic without payment. Cogent refused to pay the ISPs, but Netflix itself eventually paid both Verizon and Comcast for direct connections to their networks, alleviating traffic problems.

“With such disputes as a backdrop, the FCC has received a lot of points of view on the manner in which the current traffic exchange regimes are or are not working,” Milkman said. “One question might be this: are these disputes just business negotiations that can be resolved adequately in the marketplace? Or are they a warning sign of a breakdown of a functioning marketplace of interconnection and traffic exchange on the Internet? We at the FCC don't know the answer, but we know we need to learn more about how the marketplace is or is not functioning.”

The FCC is seeking comment on a new set of network neutrality rules that will prevent ISPs from blocking Web services while allowing payments in exchange for priority access to consumers. Although the proposed rules would not regulate traffic exchange, the commission asked the public to weigh in on the issue as part of the net neutrality proceeding.

“Some parties have sought to expand the scope of the [proposed rules] to include issues related to Internet backbone providers, including issues of traffic exchange such as peering, transit and also CDNs,” Milkman said. “We're seeking comment on this question of scope in order to hear from those who may disagree with the suggested treatment of peering and traffic exchange, and we'll learn from those comments.”

Wheeler recently told a Congressional committee that peering is something that "the commission needs to look at and will be looking at." However, the FCC hasn’t created a standalone proceeding to examine the issue.

“At the moment, we have many more questions than answers,” Milkman said.